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How to explain the cost of technical labor to a non technical investor?

Hmmm so where do I start... I am in an interesting position. I run a tech firm in southern AZ, we're developing some pretty incredible stuff and we're funded. We received an initial seed investment that with my current burn rate will allow me to continue development for another 5 months (we've been grinding away since may) in order to scale, hire on a few more full time developers, and assure said developers that they want to continue working at my company I need follow on capital; which my current investor has already agreed to fund. All of this is great and there really are worse problems to have but here is my problem. I cant make him understand the high labor cost associated with technical development. My current projections outline my COL at close to 80% of my total projected expenses, which, once you account for the actual requested capital it is still stupid lean. Any tips on communicating effectively what it costs to hire, and maintain quality developers and engineers? Thanks, -CA

tboyd47 11y ago
I assume by technical labor you mean programming effort. It is hard to communicate the effort required to produce software to a non-programmer. But it can be done. You have to understand the nature of the problem. "How long will it take for you to do X?" "It will take me about a month." "Really? It doesn't look like it's that much work." This is not an information gap, it is a perspective gap. You are looking at it from the angle of completing the task, and he is looking at it from the angle of cutting costs. You say, "X is harder than you think because of Y and Z," and he says, "Then just leave out Y and Z for now and do only X." You say, "It takes Google two months to do X," and he says, "That's why we're going to beat them to it." You say, "Many smart people have tried to do X and failed," and he says, "Then do it right this time." There's no end to these conversations. Just give the best guess you can on estimates, and don't budge. Don't feel like you have to justify it by revealing personal details about your life, like cost of living. It's not like you're building snowboarding trips into your estimate. This is your professional opinion. Just tell him, if you want rushed software that's gonna fail in 6 months, I can deliver it whenever you want, but I'm trying to build something you can use. Sometimes it's even a trust issue. If the level of trust is not established, then he will doubt you no matter what you say. So you might have to roll up your sleeves and itemize the crap out of every task until he understands that you aren't just pulling his leg.

tboyd47 11y ago

I assume by technical labor you mean programming effort. It is hard to communicate the effort required to produce software to a non-programmer. But it can be done. You have to understand the nature of the problem. "How long will it take for you to do X?" "It will take me about a month." "Really? It doesn't look like it's that much work." This is not an information gap, it is a perspective gap. You are looking at it from the angle of completing the task, and he is looking at it from the angle of cutting costs. You say, "X is harder than you think because of Y and Z," and he says, "Then just leave out Y and Z for now and do only X." You say, "It takes Google two months to do X," and he says, "That's why we're going to beat them to it." You say, "Many smart people have tried to do X and failed," and he says, "Then do it right this time." There's no end to these conversations. Just give the best guess you can on estimates, and don't budge. Don't feel like you have to justify it by revealing personal details about your life, like cost of living. It's not like you're building snowboarding trips into your estimate. This is your professional opinion. Just tell him, if you want rushed software that's gonna fail in 6 months, I can deliver it whenever you want, but I'm trying to build something you can use. Sometimes it's even a trust issue. If the level of trust is not established, then he will doubt you no matter what you say. So you might have to roll up your sleeves and itemize the crap out of every task until he understands that you aren't just pulling his leg.